Oil prices have dropped as Libya’s output increased, Syrian President Bashar al-Assad said he will provide international inspectors access to chemical weapons facilities and Iran’s new President Hassan Rowhani appeared to strike a conciliatory note with the West.
Fadel Gheit, a senior energy analyst at Oppenheimer in New York, told New Europe that the reason for the price fell was “easing of global tension, partial restoration of Libya’s oil export and increased oil export from Saudi Arabia to slow down rising oil prices. Saudi Arabia does not want oil prices to derail global economic recovery because it hurts them in the long term”.
The Saudis also increased oil production in order for Riyadh to stabilise the market when Libya production was halted a few weeks ago as oil fields and ports were shut amid protests. However, Libyan oil production will rise because of the restart of al-Sharara and el-Fil fields.
Unrest suppressed the Libya’s oil potential. “If Libya ends up getting back to 1.3 million barrels per day, I think you will see oil prices going well below 100 per barrel in very short period of time,” Gheit said. “If there is no physical disruption or people shooting at facilities or terminals, then within two-three weeks the production could double or triple from the current level because there is nothing physically damaged. Basically, they [Libyans] were interfering with the loading of the ships because tribes are fighting over the whole get-the-right-of-the-oil revenue,” the Oppenheimer analyst added.
On 20 September, New York’s main contract, West Texas Intermediate (WTI) for October delivery, was at $106.06 a barrel in morning trade. The European benchmark, Brent North Sea crude for delivery in November, was at $108.61.
Dwindling geopolitical concerns of a US-led military strike on Syria also helped to dampen prices. “Any moderation or cooling off in the Middle East will tend to bring oil prices down,” Gheit said.
Assad said in an interview with Fox News that meeting the disclosure and inspection conditions under the Chemical Weapons Convention, the international accord banning such arms, is “no problem, we can do it tomorrow”.
Syria borders Iraq and is near Iran, countries that are major Organization of Petroleum Exporting Countries (OPEC) producers.
Meanwhile, Rowhani said in an interview with NBC that Iran was not seeking war but rather peace in the region when specifically asked about Israel. He added that he would never seek to develop a nuclear weapon. He also said he has authority to negotiate a deal with Washington.
Gheit pointed out that if the West ends up lifting the economic sanctions from Iran, Tehran will be able to sell oil in the open market at much higher rate. “Eventually what Iran is desperately in need of is really to prop up its economy. Because the Mullahs in Iran know that they are on shaky ground because at the end of the day you cannot keep people angry, hungry and poor for too long,” Gheit said. “They want to beef up their economy and that can only happen with total lifting of the sanctions with the renouncement of their nuclear goal or ambitions but most importantly if foreign capital gets back to Iran.”
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